Treasury Ends Obama-Era Retirement Savings Plan

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President Barack Obama visited a steel plant in West Mifflin, Pa., in January 2014. He used the occasion to sign a memo ordering the creation of a starter retirement program known as myRA. The Treasury has decided to close it, citing low demand.CreditCreditStephen Crowley/The New York Times

An Obama-era program that created savings accounts to help more people put away money for retirement is being shut down by the Treasury Department, which deemed the program too expensive.

The 30,000 participants in the program, known as myRA and intended for people who did not have access to workplace savings plans, were sent an email on Friday morning alerting them of the closing. Participants were informed that they could roll the money into a Roth individual retirement account, the Treasury Department said.

President Barack Obama ordered the creation of the so-called starter accounts three years ago, and they became available at the end of 2015. Since then, about 20,000 accounts have been opened, with participants contributing a total of $34 million, according to the Treasury; the median account balance was $500. An additional 10,000 accounts whose owners have not contributed to them have been opened.

Jovita Carranza, the United States treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The program has cost $70 million since 2014, according to the Treasury, and would cost $10 million a year in the future.

The goal of the myRA accounts — which operated much like Roth I.R.A. accounts — was to encourage saving, particularly among lower-income workers. Account holders could contribute up to $5,500 a year, or $6,500 if they were 50 or older. The money could be deducted automatically from users’ paychecks, or they could contribute to the accounts by making transfers directly from checking or savings accounts.

The myRA program was deemed a conservative way to save — and tailored for people who were not accustomed to investing in the markets — because account holders could not lose money. The funds were invested in United States Treasury savings bonds, which paid the same variable rate as the Government Securities Fund, available to federal employees through the government retirement plan.

There was not a minimum deposit or a fee. But the maximum workers could save was only $15,000. At that point the balance would be rolled over to a private-sector retirement account, perhaps a more traditional portfolio of stocks and bonds.

Mark Iwry, the chief architect of the program that was built over nearly six years while he served as senior adviser to the Treasury secretary during the Obama administration, said it had been designed to have many uses over time. Besides being a safe way to introduce people to saving for retirement, it was expected to serve as a key investment option within some state-run retirement programs — geared to the tens of millions of people without access to employer-sponsored plans — that are in the process of being created.

The program was also seen as a place to direct a portion of a tax refund, and as a bucket of sorts that could be used to capture the small sums that are automatically rolled over by employers from larger 401(k) plans when workers change jobs.

“The decision to cancel the myRA in its introductory phase reflects a fundamental misunderstanding of its purposes and potential as a long-term investment in working families’ economic security and financial independence,” Mr. Iwry said. “There are several legitimate ways to assess a program’s costs and benefits — prematurely is not one of them.”

The closing of myRA is the latest step taken by the Trump administration to reverse Obama-era savings initiatives and investor protections. In his first month in office, President Trump requested the review of a rule that requires brokers to put their customers’ interest first when handling their retirement money. He later signed a joint resolution that reversed a rule that would have made it easier for states to create their own retirement savings programs.

Several states — including California, Illinois and Oregon — are moving ahead anyway. And while some states had plans to include myRA as a “safe” investment alternative, that will no longer be an option.

The program “offers a really good solution,” said Tobias Read, state treasurer of Oregon, which is running a pilot of its retirement savings plan this month and had expected to use myRA as its “capital preservation” alternative. “Without it, we will be forced to look at other options, which frankly aren’t as good for that purpose.”

On July 14, a group of Democrats in Congress wrote a letter to Steven Mnuchin, the Treasury secretary, asking that his department demonstrate its support for the myRA program.

“Given that this administration has worked to reduce access to retirement plans for millions of Americans,” the letter said, “it is more critical than ever for the Treasury to strengthen one of their remaining options for retirement savings.”

A version of this article appears in print on , on Page B2 of the New York edition with the headline: Treasury Ends Obama-Era Retirement Savings Program. Order Reprints | Today’s Paper | Subscribe